Some of the best investments you can make aren’t in the stock market, but in yourself.
Your earning potential over your working career carries big implications for your ability to reach financial success. The more money you earn, the bigger the gap between your available cash and your living expenses. That provides more opportunities to save and invest — and in turn, to continue to grow your wealth and reach financial independence.
This may seem pretty obvious. Most people would agree that earning more money would make it easier to save more and reach important financial goals, like buying a home or paying for a child’s college education. And yet, many workers don’t negotiate for a higher salary when they’re offered a job. Plenty of others fail to negotiate for a raise in their current positions, even when they’ve taken on additional responsibilities or have added tremendous value to their companies.
You won’t receive what you want if you don’t ask for it. Don’t wait for your boss to come by your office and tell you that your next paycheck will be 10% bigger. Take the initiative and make a smart investment in yourself and your financial future by learning to negotiate.
Why Do You Need to Negotiate a Raise?
Before you learn how to negotiate a raise, you need to understand why it’s so critical. It’s well worth your time and effort to make the effort to ask and prove why you deserve it.
We’re not just talking about the difference in making $50,000 per year and $52,000 per year. If we were, negotiating for more money may not be so important. Sure, no one wants to turn down an extra $2,000. But it’s easy to talk yourself out of negotiating for a raise if you feel uncomfortable having that conversation or aren’t sure how to do it. The extra $167 bucks per month — what $2,000 per year breaks down to, and that’s before taxes are taken out — may not seem worth it.
Here’s the thing: A raise is just like any other investment. It compounds over time. While one raise may start as “just $2,000” in one year, the next year could see you earning $3,000 more. In two years, your salary went from $50,000 to $55,000. And it will continue to grow if you continue to negotiate for more.
On the other hand, let’s say you determined that $167 per month wasn’t worth what you thought would be an uncomfortable situation (or taking the time to learn how to negotiate a raise and prepare to do so). So you continued to earn $50,000 this year, and $50,000 the next year. Let’s say in the third year, everyone in your company received a 3% pay bump. Because you never negotiated for more, you only added $1,500 to your salary. But had that version of you who had negotiated raises in the past received the same 3% bump at the same time, you would have added $1,650 to your salary.
That’s how this investment pays off for you: it eliminates opportunity costs and allows your earnings potential over your entire career to rise. That’s why you need to negotiate for higher pay. Here’s how to do it.
Do your research ahead of time. Know what the average salary is for someone in your position with your years of experience. Sites like PayScale.com and GlassDoor.com will give you free salary data matched to your exact job profile. Yes, the goal is to negotiate for more, but you need to be reasonable. If the average salary for your career is $45,000 and you currently make $40,000, negotiating for $55,000 isn’t going to work out in your favor.
However, you should have a solid number in your mind. Expect your boss to ask you how much you want, and be prepared to give a concrete answer.
You also need to gather up supporting evidence to show why you deserve your raise. This could be anything, tangible or not, that demonstrates you’ve gone above and beyond and have earned yourself a higher paygrade.
Once you feel like you have all the information you need, practice. Practice what you’ll say and get to know all that information you want to present. Making yourself familiar with what you’ll say and why you want to say it helps ease your nerves. You should be prepared to defend your assertions, and practicing helps give you the confidence to do so without getting flustered or frustrated.
Give your boss a chance to prepare, too. This means scheduling a good time to meet and talk. You don’t need to give them an outline of what you plan to say, but you need to ensure they block off a bit of their time in their schedule. Your negotiations won’t go well, no matter how awesome of an employee you are, if you spring a conversation on your boss 5 minutes before her next meeting or with the phone ringing off the hook in the background.
Prove Your Value
Don’t plan on waltzing into your boss’ office and simply asking for more money. You need to have a presentation ready to roll that demonstrates why you deserve a raise. This is the time to brag on yourself and showcase your accomplishments. You’ll need to prove to your boss that you go above and beyond; performing on an acceptable level doesn’t equate to a pay bump.
Show how you add value to the company. Point out how you have taken on new responsibilities and tasks. Share how you solve problems and provide solutions. Explain why and how you help your department meet big goals.
Keep your persuasive argument professional. Your boss doesn’t care that you need more cash to send little Jimmy to private school or want to make more money so you can afford a bigger house. Remember, you’re not asking for more money because you want more money. You’re negotiating for higher pay because you’re a valuable employee who gets things done and solves problems.
Keep It Professional
If you’re turned down or don’t receive the raise you wanted, keep a professional demeanor. Don’t react emotionally or try to use threats (“I’ll quit if you don’t give me what I asked for,”) to get what you want.
Your boss may not be able to provide you with the raise you wanted for a variety of reasons. That doesn’t mean you need to walk away, defeated. Keep in mind that your compensation is made up of more than just your paycheck.
You can negotiate for a more flexible work schedule, more vacation days or sick time, or other benefits that you find valuable. If you’re a newer employee or are approaching a new job without much experience, be prepared to negotiate for compensation beyond just salary — and consider it good practice for when you’ll return to the negotiation table in 6 months or a year to ask for more.
About the author: Kali Hawlk is the founder of Common Sense Millennial, a resource for members of Gen Y who want to do more with their money. She works as a writer and content manager, and is passionate about personal finance and business. You can connect with her on Twitter @KaliHawlk.